Drewry: The profit of the container shipping industry this year is close to 100 billion US dollars, and the average freight rate has risen by 50%! Which shipping company is the most profitable?
Despite the many challenges faced by the container shipping industry this year, in the past 12 months, the sky-high freight rates and the almost unsatisfactory demand for container transportation have boosted the revenue of shipping companies.
Explosive gains have also led many container carriers, including Maersk, Hapag-Lloyd, Xingxing and ONE, to raise their full-year performance expectations.
According to the quarterly analysis of the container shipping market by Drewry, an international shipping research and consulting agency, in the context of huge disruptions in port and ship system operations, 2021 will be a year of huge profits in the history of container shipping, and carrier profits will be close to 100 billion U.S. dollars, the average freight increased by 50%.
The major changes predicted by Drewry are freight rates and earnings prospects.
As spot prices continue to soar, and contract pricing also rises, container freight rates hit a new high in the second quarter of 2021. It is currently difficult to predict when freight rates will peak, as the deterioration of the supply chain continues to push up weekly prices.
Drewry expects that the average freight (spot and contract) of global trade will rise by about 50% in 2021, which is 30% higher than the forecast in March, indicating that prices have accelerated in the first half of 2021.
The extreme rise in freight rates naturally transforms the huge profits of shipping companies. The shipping company announced a record EBIT in the first quarter of 2021, reaching US$27.1 billion, which is much higher than the US$1.6 billion in the same period last year, and even surpassed the full-year EBIT of US$25.4 billion in 2020. .
Comparison of EBIT and revenue of shipping companies in Q1 2021:
Source: Drewry Maritime Research
In view of the sharp increase in freight forecasts this year, Drewry has made a major upgrade to the outlook for the EBIT of the container shipping industry for the whole year of 2021. It is now forecasted that the industry’s pre-interest and tax profit this year will be approximately US$80 billion, higher than the previous estimate of US$35 billion. If shipping costs exceed expectations for the remainder of this year, we will not be surprised to see annual profits of 100 billion U.S. dollars.
By 2022, Drewry expects EBIT will drop by more than one-third due to weak freight rates and rising costs. As many shipping companies lock in expensive long-term charters, costs may remain for a longer period of time. At a higher level. Nevertheless, by historical standards, this will be another amazing performance.
Pre-Interest and Tax Profit and Gross Margin Forecast for the Carrier Industry Source: Drewry Maritime Research
The shortage of ships and empty containers, severe supply chain congestion, and huge demand for container freight have pushed freight rates to unprecedented new levels. This has driven the revenue of shipping companies to soar. At the same time, their stock prices have soared in the past year, and container carrier shareholders have gained A very high return.
According to an assessment by Danish Southern Bank (Sydbank) of multiple carriers, Taiwan’s two container shipping companies, Yangming and Evergreen, have been among the best in the past 12 months, with their stock prices rising 2732% and 1716%, respectively.
South Korean container carrier HMM and China COSCO also brought substantial returns to shareholders, with shareholder returns reaching 856% and 801%, respectively.
The German shipping company Hapag-Lloyd's rate of return was 258%, while Maersk's rate of return was 132%. All returns exclude dividend payments.
In addition, Drewry expects that in the peak season of the third quarter of 2021, freight volumes will continue to grow and end the year with an annual growth rate of approximately 10%. There will still be growth next year, but with the lifting of restrictions related to the new crown epidemic, consumer spending is expected to return to the service sector, and the growth rate may only be about half of this increase.
However, the current growth rate of the container fleet is not enough to meet the demand. In recent years of cautious newbuilding contracts, Drewry predicts that the fleet will grow by only 4.2% this year and 2.8% in 2022. Both of these scenarios are far below the world port throughput forecast.
Port throughput forecast in 2021 Source: Drewry Maritime Research
However, by 2023, Drewry believes that the new shipbuilding contract will bring about the risk of overcapacity. Since the new environmental regulations will become law in early 2023, the future supply demand will be severely affected. In order to comply with this regulation, the container fleet It may slow down significantly, or it may not.
Unfortunately, Drewry is not optimistic about finding a solution to the supply chain disruption. He believes that the market is facing a medium-term (or long-term) supply shortage. In particul
